Intel Corporation (INTC - Free Report) is expected to report its Q2 earnings results after market close Thursday. YTD, INTC stock is up 8.4%, significantly underperforming the S&P 500's 17.1% climb.
Based in Santa Clara, California, Intel is the second-largest semiconductor chip manufacturer in the world. Intel is also the second-highest valued chip maker, based on revenue, only trailing Samsung Electronics (SSNLF - Free Report) in both categories.
Intel is credited with the invention of the x86 series of microprocessors, which is the processor most PCs use. Intel holds the majority of market share for these chips, significantly ahead of its nearest competitor, Advanced Micro Devices (AMD - Free Report) .
Currently, INTC is trading around $51 per share, that price represents a P/E of 11.56. Intel’s P/E is well below its industry’s average of 15.79. Intel has traded at a discount historically, but its P/E has decreased relative to its industry’s recently making it seem relatively undervalued.
Q2 Outlook & Earnings Trends
Intel is expected to report $15.60 billion in revenue for Q2, according to our Zacks Consensus Estimates. This estimate would mark an 8% decrease from Q2 2018, as well as a 3% decline from Q1. Last quarter was the first quarter that Intel failed to post year-over-year growth since Q3 2015. and after revenue last quarter remained flat year-over-year, it is now expected to decrease which is not a good sign for Intel.
Over 80% of Intel’s Q1 revenue came from two areas: its data center group, which accounted for $4.9 billion, and its client computing group, which accounted for $8.6 billion. Both areas are expected to see a decline in Q2, according to our Zacks Non-Financial Metrics. The client computing group’s revenue is expected to fall 7.7%, while the data center group’s revenue is predicted to fall 11.5%. The data center group revenue is expected to be flat quarter-over-quarter, remaining around $4.9 billion, while client computing is expected to decline to around $8 billion from $8.6 billion.
Meanwhile, second-quarter earnings are expected to fall over 15%, bringing quarterly EPS to $0.88. This quarterly decline is projected to contribute to the predicted yearly EPS decrease of 7.86% against 2018.
These estimates are very close to Intel’s own guidance it provided during its Q1 earnings, so investors have been prepared to see revenue and earnings decrease amid the broader chip decline. With that said, stocks can be highly volatile after an earnings report and INTC is no exception.
Over the past eight earnings reports, Intel stock has moved an average of 6.5% immediately following the release. Although it may seem like an opportunity to make quick profit, it could also be a chance to lose money, so investors should be careful when investing this close to an earnings report.
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